DoD halts shifting war money into base budget

Experts: Move Could Protect Some Programs

May. 7, 2013 - 11:59AM
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WASHINGTON — For years, the Pentagon has been working to move funding from temporary war spending accounts into the base budget, particularly for brick-and-mortar efforts that were borne out of a decade of counterinsurgency fighting in Afghanistan and Iraq — and will likely live on long after the last soldier has left Bagram.

Heavily armored vehicles, unmanned aircraft and even Army end-strength increases have all been funded in part or wholly through the overseas contingency operations (OCO) budget. Under pressure from Congress, the US Defense Department has been shifting funding for these institutionalized efforts into the base budget, leaving the true downrange operational funding in OCO.

But that’s now being put on hold.

“We agreed that we would not try to move any further money from OCO to base, just because there is so much going on” with budget uncertainty, Pentagon Comptroller Robert Hale said during a May 2 interview.

Such a hold on shifting money to the base, coupled with the expectations that OCO funding will not decline apace with the troop drawdown in Afghanistan, could mean that some programs that were in danger of losing their funding could find a safe haven in the OCO budget, defense experts say.

“My sense is [those restrictions] have gotten looser every year as the Pentagon’s banged away at trying to use the OCO request to make up for shortfalls in the base,” said Gordon Adams, who oversaw defense budgets during the Clinton administration. “This is the environment that we’re in, and OCO now looks like an attractive pocket to put some stuff back in.”

The war budget has declined sharply since 2010, dropping from $162 billion that year to $115 billion in 2012.

“Some of the money that’s in there probably is going to have to migrate back into the base,” he said. “How we’re going to do that in the light of [the] current budgetary situation, that will be a challenge.”

Since Afghanistan is landlocked, the cost of removing equipment and supplies is far higher than DoD experienced in Iraq. DoD officials are in the process of estimating the total Afghanistan drawdown cost.

The Pentagon has not submitted a 2014 OCO proposal to Congress, but is “getting close,” Hale said. The 2014 budget request included an $88.5 billion “placeholder” for the war budget.

“I don’t think we’ll be above that,” Hale said. “I don’t know yet how much we will be below it. But it is worth saying, as we move toward a responsible drawdown, the budget isn’t going to come down proportionately to the forces there because there are a lot of costs, some for forces that are involved in other things than Afghanistan. Some for supporting activities like intelligence, that just don’t come down proportionately to troop levels.”

In that request, equipment removal and retrograde is expected to be between $3 billion and $4 billion, Hale said.

DoD requested $88.5 billion in war funding in 2013; however, after sequestration, it will only receive about $81 billion. DoD is preparing a $7 billion reprogramming request that should shift funds to cover the balance. But at the same time, DoD has experienced higher than expected operating costs in Afghanistan, particularly due to a higher fighting tempo and the cost of removing equipment.

Sequestration Estimate Down

The total level of sequestration cuts was revised after Congress passed a full-year defense appropriation in late March.

“The 1980 Balanced Budget Emergency Deficit Control Act that governs sequestration has a provision that says if the budget goes down significantly, in fiscal ’12 and fiscal ’13 in this case, more than the sequestration level, then that particular account doesn’t have to be cut further by sequestration,” Hale said. “We had a number of accounts, mainly in ‘other procurement’ and ‘military construction,’ that were cut very sharply in ’12 and ’13.”

Since the cuts went down so sharply in consecutive years, they were not subject to sequestration.

While the total impact on 2013 defense spending through sequestration has fallen — the latest number is $37 billion for the rest of this fiscal year — the cuts are having an impact.

Training across the military services has come to a halt, civilian furloughs are expected, and weapons buyers anticipate purchasing fewer systems than planned.

“You’re going to see cuts in unit procurement,” Hale said. “They won’t be huge, but they’ll be noticeable.”

Program delays, particularly in research and development, test and evaluation are expected. Even if sequestration is lifted, it will have a far-reaching impact.

“I think, unfortunately, we are incurring future costs,” Hale said. “One of the things our managers are doing ... is putting off costs and assigning a 12-month contract that covers part of next fiscal year. It essentially pushes costs off until next year.

“So unfortunately, I think we are pushing off costs until ’14, which worries me because it’s not clear that things will be a lot better in fiscal ’14,” he said.

DoD’s 2014 budget proposal does not account for sequestration, and it would have to be cut by $52 billion if the cuts remain in place.

Two-Year Money

Separately, the Pentagon is seeking more flexibility within its personnel and operations and maintenance accounts.

Money appropriated by Congress in these accounts is only good for one year, whereas procurement funding is good for three years, and research and development for two years. If the money is not spent in that timeframe, it is returned to the treasury.

Because of this, program managers have a tendency to expend funds near the end of the fiscal year. Hale said making personnel and operations and maintenance money available for two years would help end the so-called use-it-or-lose-it mentality.

“I think that would help us change the culture, and we need to continue to emphasize to our people end-of-year spending binges are bad,” Hale said.

The funds also would be available for higher-priority items, Hale said.

Frank Kendall, the Pentagon’s acquisition chief, recently released new guidance that he hopes changes the culture from a weapons buying system that punishes program managers who do not spend all of the funds.

“If somebody can return money to the department, or buy additional products in their own program, that’s a good thing,” Kendall said at an April 24 meeting with reporters at the Pentagon.

Projecting certain personnel costs in advance — such as moving expenses when troops are re-stationed — is a difficult task.

“You gotta guess at the end of the year how many of those moves, some of which occur or are paid after the end of the year, you have to estimate how many,” Hale said. “It’s hard to do.”

In the past, DoD violated the Antideficiency Act because its cost estimates were too low. Still, getting this type of spending authority is not likely, as Congress has quashed Pentagon attempts for this type of flexibility in the past.

In one instance, DoD asked Congress to allow 2 percent of the military personnel budget to be available for an additional six months. Lawmakers did not approve the request.

“I don’t have high hopes that they’re going to give me a two-year appropriation for all of [the] personnel,” Hale said.